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Excess contributions from 529 plan to Roth IRA

My father accidentally rolled over more money than my earned income as part of 529 Plan Rollover to my Roth IRA. We tried to roll back the transaction but Fidelity said the funds were already deposited into my Roth IRA. Since I don't have enough earned income, the additional funds are considered as excess contribution and TurboTax also said I should take them out our pay 6% penalty. I checked with The 529 Plan folks and they said they cannot take the excess money back into the Plan. What are my options to avoid paying taxes and 10% penalty as this would considered as non qualified distribution. I am still in school and can use those funds for this years tuition but I am not sure how to report that in TurboTax/my Tax forms. The 529 Plan folks say I wont be getting a 1099-Q this year but they will send one next year. How will I explain all of this next year to IRS?   I am so confused and dont know what to do with this situation. Any help and guidance is much appreciated. 

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Accepted Solutions
AmyC
Employee Tax Expert

Excess contributions from 529 plan to Roth IRA

Let's go by year.

Last year:  The $6300 from last year can't be pulled out for school - you can't pay the school for 2024 fees now -but the excess can be used for this year's  IRA contribution. 

2025-  The entire $7,000 can be pulled out since it is this year's 529 amount and it can go toward 529 qualified Room and Board  and Qualified Education Expenses - Internal Revenue Service

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4 Replies
AmyC
Employee Tax Expert

Excess contributions from 529 plan to Roth IRA

Assuming this happened for the tax year we are filing, 2024, these are your options:

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Excess contributions from 529 plan to Roth IRA

Thank you so much for the information. Actually there are two contributions, I see one for last tax year for $6300 and one for this year for $7000 for a total of $13,300. Seems like I can withdraw both contributions as I dont anticipate to have earned income that high this year too, and use those funds to may my tuition for next semester this year? 

AmyC
Employee Tax Expert

Excess contributions from 529 plan to Roth IRA

Let's go by year.

Last year:  The $6300 from last year can't be pulled out for school - you can't pay the school for 2024 fees now -but the excess can be used for this year's  IRA contribution. 

2025-  The entire $7,000 can be pulled out since it is this year's 529 amount and it can go toward 529 qualified Room and Board  and Qualified Education Expenses - Internal Revenue Service

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Excess contributions from 529 plan to Roth IRA

Thank you so much! 

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